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Cash flows to flood energy system soon

The cash-starved energy system will soon be flush with funds, official sources close to the policymaking circles told The News on Tuesday.

The newly-elected Pakistan Muslim League (PML-N) plans to issue treasury bills worth Rs500 billion to clear the circular debt, besides realising of receivables from provincial governments and local departments.

An expert on the condition of anonymity said that the PML-N government is quite serious about resolving the issue of the energy crisis.Sources said that the government plans to issue T-bills worth Rs500 billion to clear the circular debt but official numbers and experts calculating the size of debt to be around Rs325 billion.

Official figures revealed that the total outstanding dues towards 17 members of the IPP Advisory Committee stands at Rs168.356 billion as of May 29, while the total payables to Hubco are Rs100 billion; Kapco Rs35 billion and Narowal Rs20 billion.

The expert said that the amount of Rs500 billion was widely overstated, as according to the calculations, the total debt stood at Rs323 billion, which is in addition to Rs80 billion of the hydro sector, which actually is not being calculated in the circular debt.

However, if that Rs80 billion be included in the circular debt – which remains within the ambit of the government and have no impact on the entire chain – the total debt comes to Rs400 billion.

According to a report issued by USAID on the “Causes and impacts of power sector circular debt in Pakistan”, poor revenue collection from the distribution companies in 2012 added Rs86.90 billion in the circular debt, while another Rs72 billion was added due to poor recoveries by Hyderabad Electric Supply Company (Hesco), Peshawar Electric Supply Company (Pesco), Sialkot Electric Supply Company (Sesco) and Quetta Electric Supply Company (Qesco).

The report also revealed that Rs197 billion were outstanding by private consumers under electricity bills, which was the major reason of the current circular debt. The key to resolve the issue of electricity shortfall is the gap in payments to thermal power producers for the purchase of fuel.

This happens due to the ever-widening gap in payment collection and payment for oil / fuel required. The government has been borrowing money mostly from the domestic sources to fill this gap through various forms. These loans are harmful to the overall economy and not just the power sector in multiple ways, leading to scarcity of private credit / funds for overall industry to grow.

“Loans either in the form of direct loans or term certificates are to be paid back on time along with profit and interest. To payback, we need the payments from the final consumer, which are to be collected after consumption and then directed back to the distribution companies (Discos) and then the power producers; who eventually pay this amount to the fuel suppliers or the banks.”

The collected amounts are not sufficient to cater to payments of both, which eventually leads to power cuts and more borrowing. At the end of the calendar year 2012, these loans had surged to almost four to five percent of GDP, the report added.